Government spending on infrastructure would total R787-billion over the next three years, R390-billion of which was capital spending by State-owned enterprises, said Finance Minister Trevor Manuel in his Budget speech in Parliament on Wednesday.

He announced that this year's Budget would add a further R6,4-billion for public transport, roads and rail networks, R4,1-billion for school buildings, clinics and other provincial infrastructure projects, and R5,3-billion for municipal infrastructure and bulk water systems.

"Major investments in power generation, transport networks and telecommunications are in progress, building an environment within which mining and industrial development, tourism, and our services economy can prosper, even if the short-term outlook is poor," said Manuel.

He noted that the term shovel-ready had sometimes been used to distinguish projects that were ready for implementation from those that were still in planning, design, and contract phase.

"We are fortunate in that so much of our spending programme is not just shovel ready, but already shoveling."
This reduced the risk of launching large new projects in a global market where there were little appetite for risk and limited credit availability.

Manuel said the national Budget contributed to the financing of some of government's infrastructure investments, and that there was also a role for the country's development finance institutions to play in supporting State-owned enterprises, municipalities and private companies to raise the finance required for major capital projects.

The National Treasury noted in its 2009 Budget Review that the current balance sheet of the Development Bank of Southern Africa suggested that the bank could provide up to R38-billion in loans to meet infrastructure needs, with the Industrial Development Corporation's balance sheet indicating that it could leverage funding for potential investments of R60-billion over the next five years.

Manuel added that substantial capital spending projects were under way in the electricity sector, in the construction of new commuter rail facilities and the Gauteng freeway improvement project, which were financed outside of the main budget framework.

"Taking the financing needs of these entities into account, the public sector borrowing requirement for next year is expected to be 7,5% of gross domestic product, or some R186-billion to be raised from domestic institutions, investors, multilateral institutions and portfolio inflows from abroad."

He added that government was, other than some other countries, "borrowing not to rescue failed banks or to artificially delay the restructuring of our industry and trade, but to construct the roads and the power stations, the classrooms and hospital wards, to modernise technology and transform public service delivery, as the foundations of growth and broad-based development in the decades ahead".

SLOWDOWN = LOWER CONSTRUCTION COST

The Treasury said in its 2009 Budget Review that although the private sector was likely to curtail investment spending in 2009, the public-sector investment programme remained on track and was expected to support civil construction activity over the medium term.

"The international slowdown in building and construction activity should increase the availability of skilled personnel for local projects, while slower demand should also increase competition among contractors and lower building cost inflation."